Types of Secured Loans

If you are thinking of starting up a new business, or you are looking into buying a franchise or an existing business, the most common source of capital is usually a business secured loan. These types of loans are also taken out by existing businesses to fund their expansion through either research and development, or operational infrastructure upgrades and purchases.Compared to home loans, business loans tend to be more involved and will generally go through a more thorough assessment by the loan company before approving its application and deciding on what kind of terms and conditions to offer.In the case of a start-up company, the lender will first go over important documents such as business plans and cash flow projections. Established businesses, on the other hand, need to present the companyfs trading history.The following are types of secured loans that fall under the business loan category: Homeowner loanMost individuals interested in starting a new business usually look into taking out a homeowner loan in order to raise initial capital. These type of loans are basically no different from the standard secured loans that use personal property as collateral. However, even though a secured personal loan of this type is normally available for most purposes, not all loan companies accept applications if the money is being borrowed for a business. Commercial MortgageA commercial mortgage is a type of business loan which business owners usually arrange for in order to buy their business premises, while putting up the purchase to secure the loan. Loans of this type are used for almost all forms of commercial property, including retail and industrial premises, as well as restaurants, medical services offices and residential care facilities.Terms and conditions for a commercial mortgage vary between loan companies. Make sure to check what options are being offered and which ones will fit the needs of your business.It also worth noting that as with all other types of secured loans, your business premises will be placed at risk if you default on your loan repayments for any reason. Chattel MortgagesTraditionally, lenders would accept collateral in the form of personal property such as a home. Nowadays, however, it is possible to arrange for chattel mortgage that allows a business owner to secure a loan with company assets such as office and computer equipment. Homeowner LoansA homeowner loan uses your property as collateral for the loan. Also the most popular type of personal secured loan, a homeowner loan is relatively straightforward to have arranged. (However, it may take several weeks to receive feedback whether your loan was approved if a re-mortgage option was used, due to time-consuming survey or valuation requirements.)Homeowner loans usually have lower rates of interest compared to other types of loans due to your home being put up as security. Expect longer repayment periods; up to twenty-five years if it is a mortgage. Loan repayments are handled through separate Direct Debit since they are considered distinct from a stand alone mortgage.Payment Protection is a useful option to consider if it can fit within your budget. At least try to have your repayments covered by Unemployment Insurance or opt for an accident and sickness policy. This way, if you are unable to work and keep up with your repayments for these reasons, you will not end up defaulting. Keep in mind that your home is at risk since it is used to secured the loan. Bad Credit Secured LoansIf you have a bad credit history, you are less likely to have your loan or credit application approved. Missing a mortgage or credit card payment, or falling behind on your rent can classify you as a credit risk to lenders. A CCJ or County Court Judgement can remain on your credit record for six years, hurting your chances of being accepted for another loan in the duration.A traditional lender (bank or building society) may not be able to easily arrange a secured loan for you if this is the situation reflected on your past record, no matter how improved your present financial circumstances may be. Fortunately there are specialist companies that provide loans despite your adverse credit history, if the loan is to be secured against your property.Compared to how much you would have been offered to borrow if you had a good credit history, the amount is likely to be lower, often within a set limit. Also, you can expect to pay much higher interest rates. Actual terms and conditions will vary depending on the lender so it is best to see what different companies are offering to make sure you are still getting the best value for your requirements.